Occasionally, a lease agreement includes a guarantee by the lessee that the lessor will recover a specified residual value when custody of the asset reverts back to the lessor at the end of the lease term. Under what circumstance can the guaranteed residual value influence the amounts recorded by the lessee and lessor? In that circumstance, how are the amounts affected?
Answer to relevant QuestionsWhat is a purchase option? How is a lease potentially affected by a purchase option?In the situation described in BE 15–15, what will be the effect of the lease on Crescent’s earnings for the first year (ignore taxes)?Corinth Co. leased equipment to Athens Corporation for an eight-year period, at which time possession of the leased asset will revert back to Corinth. The equipment cost Corinth $16 million to manufacture and has an expected ...Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2013. Edison purchased the equipment from International Machines at a cost of $250,177. Appropriate adjusting entries are ...American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation on January 1, 2013. Barton and Barton completed construction of the machine on January 1, 2013. The lease agreement for the $4 ...
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